DT 21-22 / 2006

The powerful Swedish aid agency Sida is up for scrutiny. The new government has given Sida several deadlines to report on its costs and performance, a move that could shake up the Swedish aid administration in the coming months. In its instructions to Sida, funds for humanitarian assistance, Africa and environmental aid are increased. The number of recipient countries will be reduced in the course of the year.

A new report proposes to close down the Swedish mixed credits and soft loans facilities and establish a new “formally untied" and more flexible scheme. It states that Sida should subsidise guarantee premiums. Another suggestion is market guarantees and innovative loans for new techniques and products relevant for poverty eradication and climate change. Sida should outsource many tasks to Swedfund and the export credit agency, EKN.

Credits have lost ground as an aid tool internationally because of the debt burden of developing countries. Providing new loans to developing countries and later writing them off could undermine international financing systems.